History Will Remember Obama as the Great Slayer of Patent Trolls

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History Will Remember Obama as the Great Slayer of Patent Trolls

Pete Souza/Official White House Photo

One of President Barack Obama’s biggest legacies will be his healthcare plan. Another, thanks to the Edward Snowden leaks, is domestic spying.

But Obama will leave another gift to posterity, one not so obvious, one that won't be felt until years after his term ends: The history ebooks will remember the 44th president for setting off a chain of reforms that made predatory patent lawsuits a virtual memory. Obama is the patent troll slayer.

Even now, a perfect storm of patent reform is brewing in all three branches of government. Over time, it could reshape intellectual property law to turn the sue-and-settle troll mentality into a thing of the past.

“If these reforms go into effect, they will be felt only minimally during the Obama administration,” says Joe Gratz, a San Francisco-based patent lawyer who is representing Twitter in a patent dispute. “They will be felt quite strongly well after the Obama administration.”

“The president is a strong leader on these issues. We haven’t really seen that before,” says Julie Samuels, the executive director of startup advocacy group Engine. "I do think that this could be one of the legacies of this administration.”

A patent troll is generally understood to be a corporation that exists to stockpile patents for litigation purposes, instead of to build products. Often taking advantage of vague patent claims and a legal system slanted in the plaintiff's favor, the company uses the patents to sue or threaten to sue other companies, with an eye to settling out of court for a fraction of what they were originally seeking.

Against that backdrop, Obama issued five executive orders on patent reform last summer. Among other things, they require the Patent and Trademark Office to stop issuing overly broad patents, and to force patent applicants to provide more details on what invention they are claiming. One of the orders opens up patent applications for public scrutiny – crowdsourcing – while they are in the approval stage, to help examiners locate prior art and assist with analyzing patent claims.

Since a patent is binding for 20 years, the impact of the new rules won't be felt for some time. But they will be felt, says Gratz, a litigator who defends technology-heavy patent lawsuits. “The supply of overly broad, vague patents will start to dry up as new rules get put into place,” he says.

In January, Obama became the first president to elevate patent reform to a national meat-and-potatoes issue, when he used the State of the Union address to urge Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”

The market is already reacting to the wind change. Shares of patent-litigation firm Acacia dropped sharply following Obama’s State of the Union, and are hovering near 52-week lows. Shares of VirnetX are in a similar tailspin. RPX, another intellectual-property concern, has seen its share prices slashed in half over the past three years.

The House passed major patent reform legislation last year, on a 325-91 vote, in a bid to even out the litigation playing field. Among other things, the Innovation Act requires plaintiffs in lawsuits to be more specific about what they believe is being infringed, and to identify the people who have financial interests behind a company. Perhaps most significantly, it requires that plaintiffs pay litigation expenses if they lose at trial.

The bill also prohibits patent holders from suing mere users of a technology that allegedly infringes on an invention, like restaurants offering Wi-Fi access to their diners.

Taken together, Samuels says, the looming changes undermine the “I’m going to sue you unless you pay me to go away” mentality associated with patent trolling.

What about legitimate patent claims? Gratz says it's not hard to distinguish an inventor from a troll.

“If you are asserting a patent against people who have never heard of your technology and they never embodied it in commercial product, or otherwise you have no real reason to think they copied you,” he says. “And if you’re doing that, and your patent isn’t something that is very specific, and is in general vague, that is a pretty clear sign that you are a patent troll.”